The Global Marketing Environment

Friday, November 3

The marketing environment

Is composed of the actors and forces that affect a company’s ability to operate effectively in providing services and products to its customers.

It is useful to classify these forces into 2 categories

Microenvironment and macroenvironment

What’s the difference between the two?

Microenvironment – immediate environment like suppliers, distributors, customers and competitors.

Macroenvironment – economic, social, political/legal forces.

Where does everyone fit in?

CUSTOMERs

Suppliers

Distributors

Competitors

Legal

Political

Economic

SocialIndividual

MacroenvironmentMicroenvironment

Social Cultural Factors include:

Attitude of people to work.Attitude to wealthFamilyMarriageReligionEducationEthicsHuman RelationsSocial Responsibilities

Characteristics of Culture are:Derived mostly from the climate conditions of geographical region and economic conditions of the country.Traditional beliefs and values shared in a society.Way of life.Norms, customer, arts and values.Prescriptive – Product choicesLearned and socially shared.SubjectiveSaving habitsDynamic

Examples of Cultural Attitude and International Marketing

Dressing habits, living styles, eating habits, consumption pattern, priority of needs are dictated by culture.Examples:Eating of beef: Not by Indians (Hindus).Fish/Sea Food- Japanese, snakes and dogs- China saree and bangles – Indian ladies. Burka/Parda – Women of middle East.Eye contact – Right in USA and not good in Japan.

Cross Cultural Communication

(i) Low Context Culture: like USA, Canada, Germany: They use words to convey the informationand meaning(i) High Context Culture: India, Japan, Saudi Arabia, Middle East countries – Communication is mostly indirect and expressive/ non-verbal manner.

France- High context.Germany – Low context

Culture Universals

Communication needs irrespective of religion, race, region, caste, etc., like Athletic, sports bodily adornment, cooking, dancing, singing, education, joking, kingroups, status differentiation and dream interpretations.Cultural differences-Offering beverages and food to guest first – Asian Culture- USA – Not necessary that they offer food/beverages to guests first.- Time/Punctuality-Negotiation styles

• Religion – an important social institution influencing business.

• Family System: - Joint Family – Africa, Asia, Japan, China (Reduces per head demand of goods)- Nuclear Family: USA, Europe

• Culture affects behaviour and behaviour affects business, employee behaviour, consumer behaviour.

Motivation and Achievement: Materialistic and non-materialistic societies.

- Individualism and Western countries/USA.

Collectivism – Indonesia, Thailand, Japan and India.

Religion and Business Christians – Believe in capitalism, business, creation of wealth, hard work.

Islam: Profit in business property holder is trustee of Allah. Interest on loans is not recommended.

Hinduism: To conduct in ethical manner. Follow Dharma.

Technological Environment

Application of Knowledge FactorsLevel, Japan and India (use of Robots)InnovationI.T.CommunicationAviation

Japan/Germany – Automobiles industry, Steel.

Machine Tools – Germany and France.Transfer of Technology- Contract-Amount-Period.Updated Technology.

Scanning of Technological Environment

Level of Technology in Home and host Country.Compatibilities of technologies in both countries.To select appropriate technology for host country.Compatibility of selected technology with culture, taste, preferences of host country’s customers.Governmental policies regarding technology transfer.Modes of Technology Transfer- Joint Ventures, Technological Alliances.Environmental aspects and technology.

Economic EnvironmentEconomic System:

- Capitalist

- Socialist/Communism

- Mixed

Case of Mcdonald’s in Moscow in 1990:

Problem of construction material and input material of standard quality for food.

73 stores by 2001 in Russia.

Macroeconomic issues affecting business decision.

(i)Economic growth

(ii)Inflation - Higher prices, money requirement is high, affect interest rates.

- Balance of Payment.

- Economic Transition changes, liberalization, globalization.

POLITICAL ENVIRONMENT- Democracy

- Communist Countries

- Dictatorship

Types of Political Risks:

1. Confiscation: China of US properties in 1949.

2. Expropriation: Nationalization with compensation Banks in India in 1969.

3. Nationalization: Poland, Czech and Burma.

4. India and FDI in retail and aviation sectors.

Legal Environment- Common Law- Civil Laws- Contract Laws- Theoretical Laws- Degree of wide-pendence of judiciary.Common Laws: Tradition, Customers,

Culture, Precedence and usage are bases of common laws. These laws are in force in countries like, USA, UK, Hongkong.

- Regulatory bodies- Different Acts relating to

Marketing/Business.

Legal Environment

Civil or code Law :- Derived from Roman Law and found in

Germany , Japan , France , non- islamic countries and non- marxist countries.Islamic Law : Derived from interpretation of Koran.

- Found in Pakistan , Iran , Saudi Arabia and other islamic states.Marxist Law : Mainly in states of socialist economies like : Russia , China , Eastern Europe , etc,.

Legal Environment

International commercial disputes :- Between two Governments- Between two Companies- Between Government and a company

Jurisdiction in cases of disputes : - Based on jurisdiction clause included in the

contract. - On the basis of where the contract was

entered- On the basis of where the provisions of the

contract were performed.

Legal Environment

Intellectual property Rights : Each country has its own laws . Cyber laws : Each country has its own laws .

Uncommon laws in European Union : Italy : Bans all forms of Tobacco Ads.Greece : Bans all Ads. Of toysFinland : Bans car Ads related to high speedSweden : Bans Ads directed to children below

12 yrs.

Natural Environment

Topography

Water bodies

Seasons

Rains

Temperature

Location in world map

Natural Environment

Shortages of Raw Materials

Shortages of Raw Materials

Increased PollutionIncreased Pollution

GovernmentalIntervention

GovernmentalIntervention

Factors Affectingthe

NaturalEnvironment

Factors Affectingthe

NaturalEnvironment

Global Economic Forces

Economic Growth and Unemployment

Interest Rates and Exchange Rates

Development of Economic Areas

Economic State

The general state of both national and international economies can have a profound effect on an individual company’s success or failure.

Most of the world’s economies went through a significant growth period in the late 1990s, driven mainly by developments in telecommunications and computing.

As an example

Ireland – Late 1990s car sales rose from 70,000 to around 200,000 in 2000.

ipod – In 2005 saw a 60% increase over the year before - $3.3 billion. iPod's sales growth is expected to cool from a sizzling 234% in 2005 to just 18% in 2006.

Wonder why??

Economic Growth defined

Economic growth is driven by greater use of inputs (such as labor, capital and natural resources) and/or growth in productivity.

This increase in an economy’s ability to produce goods and services which brings about a rise in standards of living.

Economic Growth – what is happening?

Switzerland, Finland and Sweden are the world’s most competitive economies according to The Global Competitiveness Report 2006-2007, released by the World Economic Forum in September 2006.

Denmark, Singapore, the United States, Japan, Germany, the Netherlands and the United Kingdom complete the top ten list, but the United States shows the most pronounced drop, falling from first to sixth.

The results

Low growth rates are reflected in high unemployment levels, which in turn affect consumers spending power.

Afghanistan 40% (2005 est.)

Norfolk Island 0% (2005 est.)

Nauru 90% (2004 est.)

United Arab Emirates 2.4% (2005)

France 9.9% (2005 est.)

United States 5.1% (2005 est.)

Countries Unemployment rates (%)

What can change unemployment rates?

Interest and Exchange Rates

One of the levers that governments can use to manage the economy is interest rates.

Interest rates are the rate at which money is borrowed by businesses and individuals.

Throughout the world, interest rates are historically low.

Exchange Rates

Exchange rates are the rates at which one currency buys another. With the formation of the European Union, exchange rates between most European countries are now fixed.

For the U.S. dollar, the euro, sterling, and the yen are still traded on variable rates.

Why would the dollar not be strong today?

How much is your money worth?

1.00 Euro =1.27779 USDUnited States Dollars

1 Euro = 1.43932 Canadian Dollar

1 Euro = 1,936.27 Italian Lira

Europe and Japan have suffered a sharp economic slowdown over the past decade. To rekindle growth, they need to encourage competition (especially in the services sector), which will, in turn, boost productivity growth, the most desirable source of growth in all economies.